Corporation

Corporation definition

* Corporations are considered as separate or distinct legal entities, which means they are entirely and exclusively liable as well as responsible for their actions.

* The legal status of companies is different from that of shareholders. Corporations are eligible to buy any kind of property in their own name.

* They can sue others if they are innocent and can be sued for their misdeeds.

* Since companies are distinct and have their own legal status, they are given the privilege to have a common seal of their own, which acts as their signature.

* A common seal is used to sign accounts, papers, documents etc.

* Usually, corporations have distinct or separate legal entities, which means they will be personally, exclusively or solely responsible or liable for the liabilities they incur and will be the sole receiver of anything that is credited to them.

* A corporation will be responsible for the action taken by its directors on its behalf. But in certain cases wherein the directors fraudulently do something wrong and the liability falls on the corporation, the corporate veil will be lifted and the directors will be held accountable.

* The lifting of the corporate veil is a process wherein the real person who has done a misdeed will be held guilty.

* It makes a person entirely responsible for their actions. The person who commits an illegal or an unlawful act on behalf of their corporation will be held accountable for the losses that their company suffers as a result of their action.

Define the term corporation resolution.

* Corporation resolution is a corporate action carried out through a legal document at a meeting involving the board of directors of a corporation.

What is corporation tax and what is corporation tax rate?

* Corporation tax, corporate tax or company tax is the tax levied on a capital or an income. In the case of corporates, tax is levied on net profits. Federal corporation tax rate varies from 15-35%.

Corporation advantages and disadvantages

Corporation advantages:

* Transfer of ownership is easy in a corporate form of business.

* Transfer is done through sale of stock.

* Death of any of the shareholders will not affect the continuity of the business.

* Personal assets of shareholders will not be utilized if the company is not able to discharge its liabilities.

* It has unlimited commercial life.

* It enjoys greater flexibility in raising funds and has limited liability.

* Personal protection is offered to assets in the case of a corporation.

* Corporations can also raise money from the market by issuing multiple classes of stock.

* Corporations have the opportunity to grow and expand.

* Corporations are known for their credibility. Customers, suppliers and lenders feel more comfortable while working with a corporation.

* Corporations have an indefinite life.

Corporation disadvantages:

* The dissolution of a corporate is not an easy task because of the high level of legal implications involved in it.

* The income earned by corporates is taxed at the corporate level and then at shareholders' level in the form of dividends.

* High level of legal formalities is involved in the formation of corporations. The cost of organizing acorporation is higher.

* The time and money required for forming a corporation are more compared to other forms of organization.

* There is more compliance to rules and regulations, which makes the entire process more cumbersome.

* Corporations have to bear a high tax rate compared to other forms of business.

Corporation vs. LLC

* In an LLC, salaries and profits are subject to self-employment taxes whereas in corporations, only salaries are subject to self-employment taxes.

* Corporations are required to file and maintain the formal records of shareholders and board meetings; LLCs do not have to discharge this responsibility.

* It is easier to set an employee stock option plan for a corporation compared to an LLC.

* Corporations offer a great variety of fringe benefit plans in comparison to LLCs.

* LLCs have fewer legal formalities, no ownership restrictions, the ability to deduct operating losses, and tax flexibility in comparison to corporations.

Sole Proprietor

LLC

C Corp

Benefit

Owners have limited liability for business debts and obligations.

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Created by a state level registration (usually protects the company name)

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Business duration can be perpetual

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My have an unlimited number of owners

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Owners need not be U.S. citizens or residents

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May be owned by another business, rather than individuals

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May issues shares of stock to attract investors

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Owners can report business profit and loss on their personal tax returns

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Owners can split profit and loss with the business for a lower overall tax rate

Some of the questions on 'Corporation' our experts have answered are -

Q Give a few corporation examples.

Q Define the term corporation commission.

Q Discuss the differences between a corporation and an LLC.

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